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Commodities
Commodity trading – for physical products used in industry – began as a way for industries to ensure an ongoing supply of essential raw materials. It is for this reason why commodities comprise many of the basic components of modern life. Commodities include foodstuffs (coffee, cocoa, soybeans, wheat and barley), fuels (crude oil, petroleum, diesel and natural gas), precious metals (gold, silver, platinum and palladium), base metals (copper, lead, zinc and tin) and rare metals (chromium, magnesium, silicon and titanium) as well as more general items like rubber and cotton.
Hedging to Trading
As soon as commodity markets became established it became apparent that there was an opportunity to trade commodity contracts. For example, if a manufacturer had contracted to buy cotton at a future date, but then realised it would no longer be needed, the manufacturer would seek to sell its cotton supply contract to someone who needed the product at that date. From that basis grew the world’s great commodity exchanges, where brokers took over the matching function between the contract seller and the contract buyer. From being essentially a hedging trade, ensuring future supplies at a set price, commodity trading has developed into speculative trading.
Private Investors
Successful commodity traders look for forthcoming events driven by shortages or surpluses. At YTM Stockbrokers we are well placed to advise you when market sentiment looks like driving a commodity price one way or the other. We watch the markets diligently informing our clients when a favourable trading opportunity arises.
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